As expected, CSX is leaving the station

Posted Aug 27th 2009 6:00PM by Joseph Lazzaro
Filed under: Stocks to Buy

What a difference four months make. Institutional investors have rediscovered the railroads, including CSX Corp. (NYSE: CSX).

Wall Street has noticed that CSX's carloads will experience a gradual improvement in the quarters ahead, on the U.S./global recoveries. If you bought CSX when originally recommended on May 1, 2009 at $30.56, you're up about 40% - not bad, for a 'down-and-out' sector.

With a P/E of 16, CSX is no longer as cheap as it was in May, but I'm nevertheless reiterating my Buy rating for the shares.

However, wait for a pull-pack to about $40, if the market gives you the chance. The First Call FY2009/FY2010 EPS estimates for CSX are $2.83 to $3.23.

Stock Analysis: CSX Corp. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in CSX now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your CSX position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $17.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: CSX, CSX Corp., rail, transport